Buzz
We've all been there: you set a budget, begin purchasing according to your plan, and then suddenly face an unexpected expense that wasn't accounted for.
For smaller expenses, you can usually reallocate funds or pull from your 'miscellaneous' category (if you're using YNAB, this is conveniently labeled as 'stuff I forgot to budget for'). For larger costs, dipping into your emergency fund might be necessary.
However, if you're looking to be extra strategic with your finances, you could consider turning that unexpected expense into a designated budget line item.
At The Financial Diet, Annika Fordell shares why she began adding the previous month’s unexpected expenses into the following month’s budget:
In October, I spent $80 on over-the-counter medicine. First, for a UTI, and if you've experienced one, you know it's a nightmare and you won’t be hunting for online coupons — you just want relief right away. After that, I caught a cold. Then indigestion issues followed. Adding a 'pharmacy' category in November's budget has been a smart move so far.
This method works because it provides a more accurate view of your actual spending and allows you to plan for these costs ahead of time. If you're working to pay off debt or save for a major financial goal, adapting your budget to include as many 'unexpected' expenses as possible gives you a clearer understanding of how much you can spend each month while still reaching your savings or debt repayment objectives.
Yes, this might require trimming other budget categories to account for your predicted pharmacy costs—or car repairs, wedding gifts, or any other unplanned expenses not yet in your budget. The upside is, if you don’t need that over-the-counter medication, you can redirect the saved money towards ‘clothing,’ ‘dining out,’ or even ‘debt repayment.’
On the downside, you should definitely avoid spending the funds you’ve set aside for car repairs on anything else—because when your car eventually breaks down, you’ll be glad you had that cushion. (Setting aside a bit of money each month for future needs like car repairs, destination weddings, or a laptop upgrade is known as a 'sinking fund,' and it's one of the most effective budgeting strategies you can adopt.)
In reality, most unexpected expenses aren’t truly unexpected. They're simply unforeseen. If you buy a car, you know that repairs will eventually be necessary. If you have friends or family, weddings, birthdays, and baby showers are inevitable. Even the best meal planners face days when the fridge is empty and pizza becomes the solution. These events are a part of life.
When they do arise, be sure to include them in your budget—because these occurrences are likely to happen more than once, and you’ll want to be ready for them.
